The Sacramento region’s solar industry has been growing in recent years but not in the way or at the pace that many expected.

The expected influx of manufacturing plants and company headquarters never materialized, but the local industry is hanging on due to modest growth of relatively small companies that develop, finance, install or service solar systems.

Excitement was in the air as recently as a few years ago with the prospect of thousands of jobs stemming from the anticipated arrival of both solar manufacturers and the U.S. headquarters of European-based solar firms. Between 2007 and 2010, the Sacramento Area Commerce and Trade Organization was inundated with calls from European solar companies and was actively recruiting there.

In 2005 more than 30 CEOs, corporate board leaders and academic and community development organizations identified clean energy as one of the most promising industries to help diversify the region’s economy. Solar was a major focus.

“We saw so much activity over a short period of time in solar,” said Bob Burris, senior vice president of SACTO. “There were points in time over the course of a year or two that we were getting calls once a week from major international solar companies saying ‘we think Sacramento and California are key solar locations. We think it’s a growth area. We have very aggressive goals.’ ”

But the promise of two prominent solar manufacturing operations — Optisolar Inc. and Solar Power Inc. — crumbled. And by early 2010, four European-based solar firms with a small presence here had gone.

In 2009 the economy and lack of finances forced Optisolar to close its McClellan Park solar panel manufacturing operations, laying off hundreds of workers. A year later, Roseville’s SPI said it would manufacture solar panels at McClellan, but the nation’s weak financial markets made it difficult to sell $27.4 million in federal stimulus bonds — money it needed to build the operation — to investors. The plan was scrapped, and a majority share of the company later sold to solar industry giant LDK Solar (NYSE: LDK) of China for $33 million.

Some Europe-based solar firms simply left town. Schott Solar Inc., a subsidiary of a German company, moved its small sales and customer service office in Roseville to Albuquerque. Enfinity Corp., a Belgium-based solar development company, moved its U.S. headquarters from Sacramento to Atlanta.

Economic development experts blamed the exodus on several reasons, including the financial markets and, in some cases, bad business plans. But there had always been the promise of more companies “waiting in line to take their place.”

Today, that’s all changed.

While individual solar companies are still growing and solar installers remain busy, globally it’s a turbulent time for the industry. Germany and other countries have been slashing once-aggressive subsidies amid budget tightening — and moderately aggressive subsidies in California also are winding down, Burris said.

China, through the use of aggressive subsidies to domestic manufacturers, has helped to drive the price of solar down 80 percent over the past five years.

“A lot of American manufacturers like Solyndra and Evergreen simply went out of business because they couldn’t chase that price down,” Burris said, adding that the solar shakeout also has been linked to declining natural gas prices.

In response, the Obama administration in March ordered tariffs of 31 percent and higher on solar panels imported from China. But some fear that will slow solar adoption and cost U.S. jobs by driving up prices and hurting domestic businesses that use imported panels and other materials.

“If residential solar becomes more costly because of the anti-dumping duty, then fewer people will be willing to invest in it,” said Gopan Madathil, founder of TechCoire, a technology networking group.

Hanging on

According to a grant-funded research report prepared last year by the Los Rios Community College District Center for Excellence, employment in the Sacramento region’s solar industry nearly doubled between 2007 and 2011, expanding to 1,300 jobs. Employers surveyed in mid-2011 expected to add more than 200 jobs this year and 950 over the next three years.

The survey identified a fairly robust solar supply chain of 110 firms, including 55 that specialize in installation, 36 in wholesale trade and 19 in manufacturing, though not all companies that identified manufacturing as a focus do that work here.

At least eight companies recruited by SACTO have “sort of grown roots” and seem able to weather what’s a “pretty difficult time in solar right now,” Burris said.

For example, while Mounting Systems Inc., a Germany-based company that leased 56,000 square feet in West Sacramento, is not growing at the rate company executives expected, it projects a 50 percent year-over-year boost to revenue in 2013, which would lead to additional hires. The 30-employee company began manufacturing racking systems in January.

“We already reduced our plans here,” said Susanne Kylla, vice president of sales for Mounting Systems. “We expected something different from the market. It’s much more complicated than we thought.”

Permit processes, for starters, vary from county to county, making doing business that much more challenging, she said. At the same time, she said the West Coast solar market remains very strong and she expects the company to “definitely ramp up.”

Other companies, particularly those in residential rooftop solar, also are growing. Financing mechanisms like no-down-payment leasing programs are driving growth.

“We are seeing growth in residential on a very small scale,” said Kate Sherwood, managing director of solar industry consulting firm Execution Strategy in San Francisco. Successful companies have gotten three things right, she said. They’ve been able to get financing through large banks or a third party and reduce both the cost of solar panels and the “balance-of-system,” she said. The latter includes all else that goes into getting a project connected to the grid, from racking systems to sales and marketing costs.

“Companies are going to have to continue to evolve and innovate their business models to continue to stay competitive,” she said. “Because there are enough solar firms throughout the state, someone based in Sacramento can lose out to someone based in Los Angeles or Monterey.”

On the up side

Companies such as Paramount Solar of Roseville, which sells and installs rooftop solar, have been hiring. Paramount this summer hired 60 solar sales and management professionals, boosting its solar workforce to 100. The jobs are supported by positions in Paramount’s marketing and financing organizations. In all, Paramount now employs 330 in Roseville and recently expanded its footprint by 10,000 square feet to 48,307 square feet.

Paramount partners with a network of installers, selling solar systems in California, Oregon, Arizona and now Colorado. Most customers choose a zero-down 20-year lease financing option.

Solar installers also are landing large-scale commercial rooftop jobs. Sacramento’s Valley Solar Inc. was selected to install a recently completed 531-kilowatt project at Jesuit High School — one of the largest, if not the largest, rooftop photovoltaic system of any high school in North America, said Jesuit spokesman Jordan Blair.

The nearly $2 million, 38,000-square-foot project covers 10 rooftops. Subsidies from the federal government and Sacramento Municipal Utility District covered $1.3 million of the project cost. The school has been saving an average of nearly $12,000 per month, cutting its energy bill almost in half.

Meanwhile, in March, AEE Solar Inc. consolidated operation and distribution activities throughout the state into a new 63,000-square foot warehouse in Natomas. AEE Solar is part of San Luis Obispo-based Mainstream Energy, one of the largest suppliers of solar products, systems and services in North America.

Gregg Fisher, vice president and general manager of distribution for AEE Solar, described Natomas as an “ideal distribution point” for projects across the country.

“Solar in general is growing,” he said. “It’s been a difficult year for a lot of companies, but the market itself is still growing.”

Fisher said he expects the oversupply of solar panels to stabilize and solar to become more mainstream. He also expects to expand the local AEE Solar operation in the next 12 to 18 months.

Meanwhile, SACTO’s latest recruitment efforts in the clean-energy sector are more diverse. SACTO is talking to more companies involved in waste-to-energy, recycled packaging and alternative fuel production, for example.

“We’re responding to requests for information and competing with other regions for them,” Burris said.

SACTO still is actively recruiting in the solar industry, though there’s not a lot of activity in manufacturing. SACTO is now targeting companies focused on technologies in the industry, such as inverters, or companies active on the service side in financing or development. And recruiters are realistic about what to expect.

“I wouldn’t expect remarkable (employment) growth in solar right now,” Burris said. “But I think the companies that we have here are relatively solid.”

Madathil said SACTO did “a very good job” of recruiting in the sector, drawing attention from global companies at a time when interest was high. Ultimately, he said, growth in the industry has come more from “mom and pop installers, not manufacturers.”

“While installers are an important part of the ecosystem,” he said, “we need more design, innovation and manufacturing happening in Sacramento,” since that would lead to more high paying jobs and give birth to startups.